Food Inflation at 60% Marks Biggest Rise Among 12 Goods, Services Groups

EghtesadOnline: The average goods and services Consumer Price Index of “food and beverages” in the 12-month period ending Nov. 21, which marks the end of the eighth Iranian month of fiscal 2021-22, increased by 60.1% compared with the corresponding period of the year before, the highest among 12 groups of goods and services monitored by the Statistical Center of Iran.

News ID: ۷۸۷۳۵۶

27 November 2021

With a coefficient of 26.64%, the CPI of the group stood at 497.7 in the month ending Nov. 21, indicating a 3.1% increase compared with the month before.

The index registered a year-on-year increase of 47%.

Latest data released by SCI show that the downtrend in annualized inflation registered in the seventh fiscal month (ending Oct. 22) continued in the eighth month (ending Nov. 21).

The overall goods and services Consumer Price Index in the 12-month period ending Nov. 21, which marks the end of the eighth Iranian month of fiscal 2021-22, increased by 44.4% compared with the corresponding period of the year before.

SCI had put the average annual inflation rate for the preceding Iranian month, which ended on Oct. 22, at 45.4%.

The consumer inflation for the month under review (Oct. 23-Nov. 21) registered an increase of 35.7% compared with the similar month of the previous Iranian year. The year-on-year inflation of the month ending Oct. 22 was 39.2%.

The overall CPI (using the Iranian year to March 2017 as the base year) stood at 373 for the month ending Nov. 21, indicating a 2.5% rise compared with the month before. Month-on-month consumer inflation was 3.7% for the preceding month.

SCI put average inflation for urban and rural areas at 43.6% and 48.3%, respectively.

CPI registered a year-on-year increase of 35.3% for urban areas and 37.4% for rural areas in the month ending Nov. 21.

The overall CPI reached 368.9 for urban households and 396.4 for rural households, indicating a month-on-month increase of 2.4% and 2.7%, respectively.

The highest and lowest monthly growth in the index among 12 groups of the basket of consumer goods and services purchased by households in the Iranian month ending Nov. 21 was recorded for “transportation” and “tobacco” each with 3.4%, and “communications” with 1%.

The highest year-on-year inflation in the month under review was posted for “hotels and restaurants” with 62.4% while the lowest YOY inflation was registered for “communications” with 1.2%.

The highest and lowest annualized inflation was registered for “food and beverages” with 60.1% and “communications” with 12.6%.

PBO Chief: Taming Inflation Doable

The government is trying to curb the harmful inflationary impact of increasing money supply, the head of the Plan and Budget Organization said recently.

“The aim is to bring down inflation to single digits by tightening the monetary policy,” Masoud Mirkazemi was also quoted as saying by IRNA.

To achieve this goal, he underscored the need for “securing sustainable revenues” when drafting the budget.

“Money creation is a redline” for the administration of President Ebrahim Raeisi, he added.

Mirkazemi blamed the lack of balance between income and expenses in the budget as the main reason behind chronic inflation.

Budget deficits push up money supply as the central bank’s money printing machines do overtime which, in turn, increases inflation. Recent data released by the Central Bank of Iran show broad money supply increased to 40,680 trillion rials ($145 billion) by Sept. 22.

Economists and monetary experts say the figure is staggering and blame the bulk of economic ills, which compel the government to meet its budgetary needs, on borrowing from CBI.

The disturbing overexpansion of money supply and other factors such as rising forex rates have created conditions under which consumer prices are going through the roof and people’s purchasing power declining in tandem.

With inflation soaring to alarming levels in recent years, experts across the board have voiced increasing concern about the direction of the economy and asked successive governments to be more realistic and less idealistic in drafting the budget.

Gholamhossein Shafei, the head of Iran Chamber of Commerce, Industries Mine and Agriculture, recently said the drafting of budgets on ambitious and unrealistic revenue projections has undermined the business environment.

“The private sector strongly recommends the government to take a realistic approach when drafting the budget,” he added.

Former president, Hassan Rouhani, and his team were often criticized for making ambiguous and impractical revenue projections in the annual budgets that almost always resulted in deep deficits.

Overreliance on financial resources of the National Development Fund of Iran (the sovereign wealth fund), seeking higher taxes from struggling private companies and the unreasonable spending of dysfunctional state-run companies had been major issues of concern during Rouhani’s two terms in office that ended in summer.

Recent estimates by the Majlis Research Center, the research arm of the parliament, show the government is expected to run a budget deficit to the tune of 2,800 trillion rials ($10 billion) by the end of the current fiscal year in March 2022.